• January 16, 2019
  • By Lee Barnes, leader, Data Insights team, Paytronix

What You Need to Know to Win Back Lapsed Customers

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When Should You Engage With Lapsed Customers?

Of course, there’s a certain window of time when it’s more effective to engage with guests who have lapsed or who may be at risk for lapsing. In fact, the timing of the offer is almost as important as the offer itself.

In Figure 2, we see that at around 80 to 90 days, it becomes less likely that the gap is just “normal” variation. Remember, this is based on a sample of guests who visit about once per month, so the gap equates to nearly three times their average.

We also don’t have to view this as a single-shot opportunity. We could make a small offer earlier and then a larger offer once we become more certain that a guest has lapsed. These campaigns can be incredibly helpful in driving incremental visits and spending, so the value of the win-back offer you’re sending to lapsed guests merits careful consideration.

A rich offer can win back guests who you might have previously considered completely gone. The chart below depicts the results of one prominent brand’s campaign targeting lapsed guests. You’ll note that there are three offers of progressively increasing values delivered to guests once they reached a certain threshold of days since their last visit.

Guests who had gone between 30 and 37 days without visiting received an offer of $3 off their next purchase. This offer was sent to high-frequency visitors only. The next two offers were sent to guests who hadn’t visited in the last 90 to 97 days and then those who hadn’t visited for between 201 and 217 days. Guests who had not visited in the last 90 to 97 days received a richer offer, and guests who had not visited for between 201 and 217 days received the richest offer. The former group received $5 off and the latter group received $10 off. As the offers got richer, their impact on the target audience fluctuated, with the $10 offer besting the $3 offer despite the fact that more time has passed since the guests’ last visit.

Ultimately, this shows that guests who you think have lapsed may not really be gone. Guests will respond to rewards that they find valuable, even if some time has passed since their last visit.

How Do I Get Started?

We recommend at least a two-tier approach for lapsed campaigns. The first offer should be sent at a point that’s between two and three times the average visit frequency. For instance, if your guests visit about every 30 days, your first lapsed offer should occur between 60 and 90 days of inactivity. We suggest that the first offer be valued at roughly 33 percent of the average per-person spend. So if your guests typically spend $12, make the offer worth around $4. This could be a simple cash offer, or it could be in the form of a free menu item (e.g., an appetizer, side, drink, or dessert). We do not recommend using points offers for lapsed customers.

You should then think about sending a second offer at a point that’s between four and five times the average visit frequency. This offer should be larger, valued at 50 percent or more of the average per-person spend. Again, we suggest no-strings-attached offers that do not involve points.

Hold out a control group—at least for the first few times you try lapsed offers. As we saw in a preceding chart, there will always be some people who return without receiving an offer, so we need a control to establish how large this group is and to measure the actual impact of the campaign. Aim for at least 2,000 customers in the control to ensure a sufficient sample size.

Final Thoughts

Guests lapsing are a part of life and will happen no matter how great your concept and loyalty program are. Remember, known lapsed guests are ALWAYS better than unknown ones. If guests are unknown, you probably won’t even realize that they have stopped coming in and you certainly cannot do anything about it.

Winning back lapsed guests can significantly impact your business’s sales and traffic, but you can only accomplish this if you know enough about the guests to (A) identify that they have stopped coming in and (B) send an offer that resonates with them.

The strategy outlined here will be effective, but it is not a one-size-fits-all approach. We know that not all guests are the same, and in an ideal world, lapsed offers would be sent based on each individual guest’s visit frequency. Over time, you should refine your lapsed strategy by further segmenting guests according to visit frequency or by moving to a true individualized definition of lapsed.

Data analytics expert Lee Barnes leads the data insights team at Paytronix, a leading provider of reward program solutions whose guest engagement platform helps more than 300 restaurant and retail chains manage and grow more than $18 billion in guest spend. Barnes is a self-confessed data geek that can often be found digging into the data with his team to optimize guest engagement with more than 165 million loyal guests—through mobile, social, and today’s most innovative digital marketing tools.

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